悉尼大学资本市场与公司财务课件Lecture4精选.ppt

Example 5.8 A machine with a current book value of $60,000 is sold for $25,000. The tax rate is 30%. What are the cash flow effects of the disposal of this asset? _______________________________________________ There is a cash inflow of $25,000. There is a reduction in taxable income (NOT a cash flow) equal to the book value minus the selling price (60,000 – 25,000 = $35,000). This results in a tax saving equal to the reduction in taxable income times the tax rate ($35,000 x 0.30 = $10,500). Taxable gains or losses on disposal of a depreciable asset (cont) Finance charges When evaluating a project, all cash flows associated with financing the project (e.g. interest expenses and loan repayments) are ignored This is because we wish to know if the project is value-increasing before we determine how we are to finance it The effect of financing is included in the Weighted Average Cost of Capital – its inclusion in the cash flow analysis would result in double-counting What to include in cash flows ‘Will this cash flow still occur if we accept the project?’ Only include all cash flows that would arise as result of implementing the project These cash flows are called ‘incremental cash flows’ Inflation Inflation can have an impact on capital budgeting, because it reduces the purchasing power of future cash flows The real rate of return is the increase in purchasing power if prices rise with inflation This can be calculated using the Fisher effect: where rn = the nominal rate of return rr = the real rate of return ρ = inflation rate (5.1) Inflation (cont) The Fisher effect can be used to convert nominal interest rates to real interest rates, or vice versa As discussed earlier, the application of the consistency principle requires that: Actual or nominal cash flows are discounted using a nominal required rate of return Real cash flows use a real rate of return If calculated correctly, the NPV will always be the same using either approach and will be ex